Why Baby Boomers are making franchises a part of their retirement plans

Baby Boomer retirement planning: Franchising a new business trend

Jerome Pulcine had an eye to retirement last April when he bought the rights to convert his existing decorating business into a franchise and hold the master franchise rights in Ontario for Decorating Den Interiors.

He is part of a trend being seen in Canadian franchising. Baby Boomers are increasingly buying up franchises or considering buying some type of business to shore up their financial plans for retirement.

“One of the reasons we began looking at franchising was to build a business and eventually sell it,” said Mr. Pulcine, 57, whose wife Catherine operates their Ottawa franchise while he looks for new franchisees to set up shop around the province.

“We wanted to make sure we cemented our business so if we sell it in five years or so, we have a name along with a well-established master franchise opportunity,” he added.

Mr. Pulcine’s own search for new franchisees has yielded mostly Boomers who plan to retire in five or 10 years, but want to build a business first as part of their medium-term retirement plans. Franchising is seen as a less risky option since all of the systems, training and support are already in place.

“A lot of people are getting a golden handshake earlier than they want,” he said. That’s translating into more investments in all types of franchises and businesses.

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A TD Canada Trust survey found 54% of Baby Boomers polled have or are considering starting a business, from consulting firms to buying a franchise. A recent CIBC report found a record number of Canadians in general started their own business in the last two years, with those older than 50 comprising about a third of the new enterprises.

“We really made a shift even in terms of the franchises we present to try to prepare for this scenario of these Boomers,” said Ryan March, managing director of franchise recruiting and consulting firm Network Franchising International.

However, he said, some people in this demographic lack the entrepreneurial flair to pull it off, given many have worked permanent, full-time jobs for 30 years. “There are some preconceived notions that you’re going to line your pockets in ‘year one’ because it’s a franchise, but that’s not normally the case,” he said.

Lorraine McLachlan, president and chief executive of the Canadian Franchise Association, said people aged 45 or older account for about 40% of the attendees at the CFA’s Franchise Show.

“Boomers will want to pay particular attention to considering their exit strategy from the outset,” Ms. McLauchlan said, “especially if they are considering a horizon of around 10 years.”

Mr. March reminds potential franchisees to think about how involved their spouse or partner is going to be in the business but cautions there “is no money-printing machine contained anywhere in the building.”

Absentee owners often fail. “They want work-life balance right away … and with some businesses, that’s not a very easy thing to do,” Mr. March said.

It is clear, though, that there is a shift away from the demographic that has traditionally dominated Canadian franchises — new immigrants arriving in Canada looking to build a life and a business for themselves. “The majority of the new buyers are not new immigrants coming to Canada,” Mr. March said. “It’s Boomers.”

Mr. Pulcine cautions ambitious young interior decorators about going it on their own because he often sees them struggle. When he and his wife started their decorating business 15 years ago it was a long haul, he said. He does, however, see a place for them in franchising.

“When you’re twenty-something, you think you know it all and you can build it yourself,” he said. “The 50-plus people have been around the block a few times [and] they want to do it right. For a decorator coming out of school … to build a business on their own is a horrendous uphill battle.”

After spending 32 years working for large industrial instrumentation manufacturers in British Columbia, Brian Buckley left his employer in 2007. When his daughter, a nurse working in a hospital at the time, got a job with a home care services company, it gave him an idea.

After doing some research, Mr. Buckley realized Nurse Next Door would let him run a business, while meeting his two requirements: It would “give me a chance to build something where I wasn’t the product … and also to do it locally,” said Mr. Buckley, who became a franchisee in 2008.

“From a business perspective, it’s something that’s got a good future,” he said. “The way the demographics are going, people are going to need [home care].” He plans to let the value in the business become his retirement package. “I’m seeing a lot more people in my demographic doing the same thing.”

Ms. McLauchlin advises potential franchise buyers to research their options carefully and work closely with an experienced franchise lawyer to make their ventures more likely to succeed.

“Franchise law is a specialized area and a franchise lawyer will be able to help you understand the franchise agreement and disclosure documents,” she said.

Mr. Pulcine expects the influx of Boomer franchisees to intensify. “I think that’s going to continue big time for the next five or seven years,” he said. “It’s going to change a lot of industries.”